that in the second term. >> the epa, some power there -- >> as for immigration, there is this leaked proposal over the weekend. the white house is trying to stay out of it and at least be the best i can tell in trying to make this work. of course, it makes sense for senator rubio to be out there against the white house because he needs that for his base. but i still think something will likely happen on immigration. >> immigration, gun control -- >> i think immigration is by far the most likely. what surprised me this week is that i was at a breakfast with john boehner the day of the state of the union and he was very pessimistic about tax reform. as we were in all those crisis modes and we are about to get in another. we'll get through this and refund the tax code later. very pessimistic saying people in his caucus just think the will isn't necessarily there because -- >> it's another way they think to raise taxes, right? >> exactly. they've been talking about the fact that they're done with revenue, meaning raising taxes to get to any kind of deal. they're just going to talk about spending.

so, that actually was a little bit surprising and kind of depressing. >> but i think, candy, when congress faces the hard choices sequester tees up between firing teachers, kicking kids out of head start and having long lines at the border. what you saw earlier in the show, all those things in closing some loopholes. that loophole closing thing will start to look more attractive. >> i have to say since i don't have any time left, you totally disagree with that. >> i do. people completely forget that it was sequesteration was jack's idea to get the budget deal we had a year ago. you can walk away from it and blame republicans, it doesn't make any difference. this was the white house's payment. >> thank you, guys, so much. >> thanks, candy. >> thanks for watching "state of the union" i'm candy crowley in washington. head to cnn.com/sotu for analysis and extras. if you missed any part of today's show find us on itunes. fareed zakaria "gps" is next for

our viewers here in the united states. this is "gps the global public square." welcome to all of you in the united states and around the world, i'm fareed zakaria. on today's show the gun debate and the state of the two biggest economies in the world. first up, on tuesday in the state of the union, president obama challenged congress to vote on proposals to get weapons of war off our streets. but will it happen? can it happen? we'll talk to a world leader who made it happen in his nation. then, larry summers on how to create jobs in america. the former treasury secretary on how the president can achieve the goals he laid out for the economy. then, many worry that the world's second largest economy is headed for a crash. a rare inside look at the inner workings of the chinese economy. what's really happening there?

also, what in the world will get north korea to end its nuclear ambitions? i'll give you my plan. but, first, here's my take. president obama's state of the union address presented an expanded vision of smart government to create jobs and revive the economy. it had many important ideas in it. yet, he lowered his sights on the single policy that would both jump start the economy in the short term and create the conditions for long-term growth. infrastructure spending, having tried several times to propose infrastructure bills of around $50 billion, just 0.3% of gross domestic product, the president now further scaled back proposing a fix-it first plan of that repairs 70,000 bridges that are literally falling down nationwide. maybe he thinks this is all he can goat through the american house, but will place a band aid

on america's growing cancer of failing intrastructure. a 2009 study of u.s. infrastructure by the american society of civil engineers concluded that we need $2.2 trillion to be spent over five years to bring the nation's roads, bridges, railway tracks, airports and associated systems up to grade. let me make three crucial points. first, this is the big bang. it would be the most effective way to create good jobs. unemployment in the construction industry is among the nation's highest. around 16%. the private sector is still not investing much in construction. second, it's cheap. the federal government's borrowing costs today are lower than they are ever likely to be, again. deferring maintenance is not fiscal prudence. when your boiler explodes, it costs more than it would had you just spent the money keeping it in good functioning order. we need to spend that money now.

third, this is an area where the federal government has always had a big role, one that republicans have long embraced. in 1930, even as herbert hoover was trying to balance the federal budget, he urged large scale expenditures on infrastructure. despite all this, infrastructure spending is politically dead. president obama invited congressional republicans to a private screening of "lincoln" hoping that they would see compromise in action. of course, they refused. perhaps he should try to get them to watch the splendid new american experience documentary on the making of the panama canal. 100 years ago the united states completed what was then the most expensive, complex but ultimately successful government program in human history. it was a project where everything went wrong. the french had tried to build the canal a few years earlier and despite putting the builder of the suez canal on the job, they left in total failure.

the first chief engineer quit after the first year. his replacement left, as well. only would the third did the project start moving. yellow fever killed thousands of workers, caused others to flee in fright. the engineering challenges were immense and often seemed insurmountable. media reports were largely negative. then in november 1906, theodore roosevelt visited the canal. the first time an american president had ever left the boundaries of the united states. roosevelt, a republican, was determined that the project continue and it be adequately funded. he turned his visit into one of the first great presidential photo ops. public support for the canal grew sharply after it. through sheer perseverance the age-old fantasy of connecting the world's two great oceans became a reality. the practical result was to cut travel time for goods and people between the east and west coast by orders of magnitude, igniting

an explosion of trade. today more than 14,500 ships and 244 million tons of cargo pass through the canal annually. what are we doing today? what are we building today that people 100 years from now will look back upon with pride? for more on this, go to cnn.com/fareed. there is a link to my "washington post" column. let's get started. on april 28th, 1996, in port arthur, australia, a man named martin bryant went on a killing rampage. in the first 15 seconds of his spree he killed 12 people and injured another 10 all with an ar-15 assault rifle. in the end, 35 people lay dead, men, women and children. if his weapon of choice sounds familiar, it should.

that's what adam lanza is believed to have used in the newtown, connecticut, massacre of 20 school children and 6 educators. in its time of grief, australia actually did something about weapons like the ar-15. it banned them. joining me now from sydney, the man who made it happen, australia's former prime minister john howard. mr. howard, welcome. >> thank you, fareed. >> when you hear about this terrible tragedy, what was your reaction? >> well, my reaction was one of horror and shock. if was the largest single loss of life from one murderous incident by an individual until the slaughter in norway a couple of years ago. i thought to myself and many of the people around me that we just cannot leave a stone unturned in trying to prevent it from happening, again.

that's why i resolved it. i had only been elected prime minister to ease the authority of my new position to try to bring about change. can i say on the philosophy of it, this is not a left to right. or to use the american terminology a liberal conservative issue. it's public safety common sense issue because that is the attitude that most australians talk and i'm on the conservative side of politics. but i saw this as one of those things that demanded the use of the authority in my office to try and change. >> so, you decided on essentially what would we call here an assault weapons ban. >> yeah. i did. and the power to ban them at that time laid with the states. australia, like the united states, is a federation we only have six states and two territories and much smaller country population wise. and there were quite a few

internal difficulties on my side of politics, particularly from state governments in the largest states like queensland and western australia where the level of gun ownership and the recreational use of guns was higher than it was in the urban areas. and on top of that, of course, most of the farmers, ranchers, whatever you american term you might want to use supported our party. many of them were very angry at the ban. but in the end, we were able to use the power of public outrage, plus the fact that my government had just been elected with a big majority to in effect persuade, politely the states to implement the ban. if they are not agreed, we would hold a referendum to give the federal government the power to implement the ban, but that was not necessary. >> then you faced the problem, a

large number of these guns in circulation and you came up with a very innovative idea, which was essentially a mandatory buyback, correct? >> yes. we funded a tax levy on everybody. the buyback of something like 700,000 guns. the american equivalent of that would be 40 million weapons. that was implemented over a period of time and they were taken in by the police. i have to say, the australian experience overwhelmingly was of strong support and, again, i emphasize it came from both sides of politics. i had people stop me in the streets and say, look, i've never voted for you in my life and i never will. i wouldn't if my life depended on it. but i agree with what you did on guns. so, it was just one of those

things that people didn't see in the normal political context. they saw it in the context of a community taking action to try and eliminate the possibility of something of this magnitude happening in the future. >> when we come back with australia's prime minister john howard, the crucial question, did his nation's ban on semi automatic weapons work? and could we do something like it in america? you'll want to hear the answer. back in a moment. [ male announcer ] you are a business pro. executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds.

and you...rent from national. because only national lets you choose any car in the aisle...and go. you can even take a full-size or above, and still pay the mid-size price. now this...will work. [ male announcer ] just like you, business pro. just like you. go national. go like a pro. just like you. all right that's a fifth-floor probleok.. not in my house! ha ha ha! ha ha ha! no no no! not today! ha ha ha! ha ha ha! jimmy how happy are folks who save hundreds of dollars switching to geico? happier than dikembe mutumbo blocking a shot. get happy. get geico. fifteen minutes could save you fifteen percent or more. ♪ ♪

♪ ♪ [ female announcer ] nothing gets you going quite like the power of quaker oats. today is going to be epic. quaker up. today is going to be epic. ♪ (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities.

then you're going to love this. right now they're only $14.95! wow-a grt deal just got a whole lot better.

hurry. $14.95 won't last. before the break you heard that in 1996, australia enacted a ban on semiautomatic rifles and shotguns. weapons like the infamous ar-15 which was also used by adam lanza in newtown, connecticut. it has been 17 years since australia's ban. plenty of time to find out if it worked. more with the man who pushed it forward, john howard, former prime minister of australia. the results are quite stunning. the reduction in the rate of gun-related homicide in australia, 59% if you look at some statistics. by some statistics, down 89%.

gun-related suicide, 65%. these numbers must stun even you. >> they did. and they have been, the issue has been surveyed and researched now over quite a long period of time. even the most conservative researchers would acknowledge that a group surveyed over such a long period of time producing figures like that must mean that the change was beneficial and it was not just murders, but when i became prime minister in '96, australia had one of the highest young male suicide rates in the world. and by removing a lot of weapons, particularly in rural areas, the bushes, we call it, the potential for young men feeling desperate and so many of them have a snap point and if

there's a gun available, it's easy to give a sense of depression and despair. it's a lot harder when you have to use another method to end your life. i have often said in this debate that it's fairly easy if somebody reaches a snap point to kill a number of people with a gun. it's a lot harder to do it with another weapon like a knife. >> what i'm struck by in the debate in the united states is that it takes on a left/right, where in the rest of the world generally speaking it's conservatives in favor of being tough on guns, if you know what i mean. they tend to be, these are the kind of policies that law enforcement officials usually support and it is conservatives like you, you are very staunch conservative. 100% supporter of george bush during the iraq war. you've always been a tough guy. do you find it odd to find yourself on the left side of the debate? >> this is not a conservative liberal issue, left/right issue. we've always seen it as being a question of public safety.

and on this issue, our experience was that we did have gains in public safety and great gains in reduction of mass murder through the ban. now, i know the history of gun ownership in the united states, i respect it. america has a bill of rights, australia does not. the courts in australia do not have the same capacity to decide these issues as they do in the united states. so, i acknowledge all of the differences and, clearly, it is a debate that has to go on in the united states without people from outside giving any lectures. i'm not doing that.

i'm simply explaining what we did. what our feelings and emotions were and there was enormous public support, especially in urban areas for what we did 17 years ago. there was a lot of resistance inside sections of my own political base about with the experience of 17 years, even the most cynical skeptical person would acknowledge that we have made a big difference with that prohibition. >> well, if we look at the 18 years leading up to 1996, there were 13 gun massacres in australia. since the law has been passed, there has not been a single one. gun homicide, as we say, is down somewhere between 59% and 80%. do you find -- did it change something about the politics? do you find the people who were on the other side have come around? >> i think probably some of them

have. but there will always be a group of people, quite understandably, argue, look, i enjoy a shooting. i enjoy hunting. i'm very careful. i'm very scrupulous about keeping my weapons away from other people. i didn't break the law. i didn't murder anybody and, therefore, why should you interfere with my freedom to be a happy hunter or a shooter? i understand and respect that point of view, but the sad fact is that it's the ready availability of guns that results in mass murder. >> when you confronted this issue, did you hear one of the things that we hear, which is, you know, it's really all its popular culture that is to blame. it is all the violence on television and movies. i ask this because australians consume much of the same popular culture that we do in the united states, yet you kill many fewer people. >> i did hear those arguments and they are valid. i think the violence that young children are subjected to off and on through videos and television is excessive.

i accept that. and you can always do better with mental health. but that is not as dominant an issue in my mind as the enduring problem that when people snap and there's a weapon that can kill a lot of people very rapidly available. in many cases the person who snaps will use that weapon. and you've got to reduce the possibility of that, in my opinion. that was the view we took in australia back in 1996 now. i'm not pretending that our mental health processes or dealing with it are better than anybody else's or i'm not pretending that we don't have violent video. we do consume practically the same popular culture as america. a lot of it comes from america.

we speak the same language, sort of. and, so, we have a lot of things in common and it's, in that way, we should try and share each other's experiences in tackling these problems. >> john howard, former prime minister of australia, thank you very much. >> thank you. up next. what in the world. the knee-jerk reaction to north korea's latest nuclear tests is to call for more punitive action. i'll give you my idea, which is very, very different. it could be more successful. tdd#: 1-800-345-2550 is your old 401k just hanging around? tdd#: 1-800-345-2550 consider if rolling it over to a schwab ira tdd#: 1-800-345-2550 might let you get more out of it. tdd#: 1-800-345-2550 like earning a bonus of up to $600 tdd#: 1-800-345-2550 in a schwab ira tdd#: 1-800-345-2550 and 150 commission-free online trades tdd#: 1-800-345-2550 plus our rollover consultants handle virtually tdd#: 1-800-345-2550 all the details tdd#: 1-800-345-2550 to help you focus on the bigger picture. tdd#: 1-800-345-2550 so give us a call and get started today. tdd#: 1-800-345-2550 see schwab.com/iraoffer for terms and conditions.

♪ shimmy, shimmy chocolate. ♪ shimmy, shimmy chocolate. ♪ we, we chocolate cross over. ♪ yeah, we chocolate cross over. ♪ [ male announcer ] introducing fiber one 80 calorie chocolate cereal. ♪ chocolate. [ female announcer ] roc® retinol correxion max. the power of roc® retinol is intensified with a serum. it's proven to be 4x better at smoothing lines and deep wrinkles than professional treatments. roc® max for maximum results. and deep wrinkles than professional treatments. see lioutdoors, or in.ight. transitions® lenses automatically filter just the right amount of light. so you see everything the way it's meant to be seen. maybe even a little better. visit your eyecare professional today to ask about our newest lenses, transitions vantage and transitions xtractive lenses. experience life well lit. ask which transitions adaptive lens is best for you.

so i used my citi thankyou card to pick up some accessories. a new belt. some nylons. and what girl wouldn't need new shoes? and with all the points i've been earning, i was able to get us a flight to our favorite climbing spot even on a holiday weekend. ♪ things are definitely looking up. [ male announcer ] with no blackout dates, you can use your citi thankyou points to travel whenever you want. visit citi.com/thankyoucards to apply.

now, for our what in the world segment. north korea's nuclear tests drew world leaders, president obama promised swift and credible action. we know what this is likely to mean. more sanctions and greater isolation for pyongyang. what if the answer should really be the opposite? what if the best way to change north korea is more contact, commerce and communication with it rather than less? if you look at examples of how we deal with other countries, sanctions rarely work. in cuba, 54 years of sanctions

have kept the castros in power while its citizens have suffered. they remain isolated with the lowest rate of internet penetration in the entire western hemisphere. in iran, unprecedented sanctions have been a place for years but the real powers that be are imperil. in syria, no amount of pressure has had any impact on assad's brutality. if you ask haitian diplomats they'll have the opposite approach. traded with burma, invited it to diplomatic gatherings and over time persuaded the military hunter to open itself up both domestically and to the world. there's a pattern in the last two decades of negotiations with north korea. first comes a missile test, closely followed by a nuclear test, global sanctions and then some talk and then back to square one, more provocations.

all the while, the people of north korea have suffered. in the 1990s, an estimated 2 million people died in a nationwide famine. north koreans have almost no contact with the outside world. less than 10% of them even have mobile phones. and those are not allowed to call outside the country. per capita income is estimated to be around $1,000 a year, about 1/20 of that of neighboring south korea. the best path to open up north korea might be trade deals, travel programs. we could start with student exchange programs. about a decade ago syracuse university started a research collaboration with north korea's kim check university of technology. led to the first digital library. technology from that partnership enabled the new york philharmonic to broadcast its recent concert in pyongyang. ♪ we might need more of these partnerships, not fewer.

google's founder eric schmidt recently visited north korea. we may need more such trips by more entrepreneurs like him. in the very short run, they do give the regime some credibility. but in the long run, capitalism and commerce are the acids of modernity that wear down dictatorships. up next, how to create jobs in america. my discussion with the former treasury secretary larry summers. don't miss it.ef red search engine? search engine, uhh, probably google. if we do a side by side blind test comparison, and you end up choosing google, you get an xbox. i'll bet you the xbox, you bet me your son. well let's look up what you need. okay, i would do the left. yeah? what?! i am a daddy! bing wins it! bing won. bing did win. people prefer bing over google for the web's top searches. don't believe it? go to bingiton.com and see what you're missing. [ male announcer ] when we built the cadillac ats from the ground up

to be the world's best sport sedan... ♪ ...people noticed. ♪ the all-new cadillac ats -- 2013 north american car of the year. ♪ for a limited time, take advantage of this exceptional offer on the all-new cadillac ats. exceptional offer ♪ (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities.

hello, everyone. i'm deborah feyerick with a check of our top stories. the march 1st automatic spending cuts deadline is just days away. this could affect all of us if the congress and the president don't agree on a deal, agency will face major cuts. here's what you could see changes. tsa at the airports, defense, social programs and law enforcement. a scene of destruction in iraq today at least 21 people died in a series of car bombs and roadside explosions. 125 others wounded. markets in shiite neighborhoods were the main targets. sunnis in the country have been

demanding better treatment from the shiite-led government. pope benedict xvi led tens of thousands in prayer for strength. he gave his second to last angulus prayers. he announced he is resigning because of old age. coming up at the top of the hour, model kate upton describes the experience of doing the "sports illustrated" photo shoot in antarctica in 35 degree below temperatures. fareed zakaria "gps" continues right now. >> mr. speaker, mr. vice president -- president obama's state of the union speech contained nearly 6,500 words. now, look at this word cloud of his speech. the more often he used a word, the bigger it appears. jobs is by far the most prominent. he said the job or jobs 47

times. the president wants to create more jobs. so do most americans. so how to do it. i spoke with a man uniquely positioned to know. larry summers has been one of the world's leading economists for 30 years. he has served as treasury secretary, president of harvard and director of the national economic council. welcome, larry summers. >> good to be with you, fareed. >> so, the president wants to create jobs. everyone tells him this is the number one priority that the administration should have. put very simply, why has it been so difficult so far? why are we so many years, almost five years into a recovery and the distinctive feature of it is just aren't those many jobs. >> fareed, this has been a unique, not unique, but unusual kind of downturn. it's a downturn that came because there was too much leverage. asset prices got too high. and then the bubbles burst.

when the bubbles burst, everybody wants to save. they want to take down their debt. they don't want to spend. so, it's very hard to achieve rapid growth. yes, it's true. this was caused by too much borrowing and spending. but the irony of a crisis like this is that it's only resolved with more borrowing and spending. that's why it would be madness to let the sequester go brutally into effect a month from now and slash federal spending quickly. spending, taxing, it all does have to be adjusted over time, but not immediately. >> a lot of people listen to that advice and say, but, but isn't there something different this time? this old formula that what you should do is spend your way out of a recession isn't going to work because debt is 70% of gdp. we're in a global economy and

the constraints are different and, look, it hasn't worked they say. we're five years into it and the biggest stimulus in american history. the fed has kept rates extraordinarily low. there has already, i mean, you read this in "wall street journal" editorial page every other day. there has already been an enormous fiscal stimulus and it hasn't worked. >> that's the kind of thinking that in the 1930s made the depression great. first, you look at 2008, the fall of 2008, it was worse than the fall of 1929. yet we are in a profoundly different place today than we were in the 1930s. look at the countries that have had more stimulus. they have had more growth. look at the parts of the united states that have had more stimulus. they have had more growth. so, i would argue that the right reading of the evidence is that it does work, but, we're in a very big hole and we need to

keep, we need to keep on doing it. but i think where the critics are right is that some people portray this as being all about government spending. and that's wrong. it's about unlocking private spending. >> a lot of people would argue that the key to getting private sector spending going is to reduce uncertainty. this somewhat vague word, but the idea is that there's $2 trillion of cash sitting on corporate balance sheets. they earned this money and they are not spending it. they are actually, if you look at the last month or two, they're spending even less than they were planning to. how do you get that going? a lot of republicans, as you know, say well that's where the president's agenda is because he needs comprehensive tax reform and all these things to give business a feeling it's okay to spend money. >> in one area i think there's truth to that. think about a library that has a lot of overdue books out and there keep being rumors that

there is going to be a library amnesty two to three months from now. that's the single worst way you can have policy for getting the books back. might be a good idea to give the amnesty, might be a good idea to say that the amnesty will never come. but if you say there might be an amnesty in two months, that's when you'll never get any books back. that's exactly what we're doing with our corporate tax reform debate. that's an area where washington absolutely should provide clarity or certainty this year. it should do whatever it's going to do on corporate tax reform and then it should make clear that those rules are going to be in place for the next five years. that will contribute to bringing money home and getting it reinvested in the u.s. economy. >> so, what would you do when we talk about jobs and you look at the focus and you say, okay, so what we need to do is not do austerity, do more stimulus. you were there for the passage of the first stimulus bill. how would you do it this time in a way that's smart, that's

effective? what are the lessons you've learned about how do you create jobs? >> we have to make the growth deficit a priority in just the way we've been making the fiscal deficit a priority. because the truth is, we are never going to resolve the fiscal deficit in any ultimate sense in an economy that's growing at 1%, 1.5% or even 2% a year. we have to move to a focus on the growth deficit and if we do that, i think we'll be surprised at how rapidly we'll see improvement in the fiscal picture and i think we'll see a variety of -- because extra tax revenues will come in and less need to pay unemployment insurance benefits. i think we'll also be surprised at, as the economy starts to

grow, businesses will be able to invest more in innovation. there's a tendency, which i think is badly wrong, to argue that we need to stop focusing on the short run and we need to focus on the long run instead. i think when we put the focus on stopping stagnation and having america be a rapid escalator, again, what we are doing is the policy that will best prepare us for the long run. >> so, what you are saying, finally, is that the whole effort of kind of the conventional wisdom around simpson-bowles and around all those tenure packages is really just wrong right now and that the focus needs to be on this question of growth, getting the economy on velocity and then maybe looking into that? >> fareed, i believe a healthy individual can walk and chew gum at the same time and a healthy government can pay attention to

long-run deficit reduction. look, we do have to make those adjustments. if we don't make those adjustments, we're exposing ourselves to substantial risks that we shouldn't. so, i'm not here to say that long-run deficit reduction is unnecessary. i am here to say that it is widely insufficient. that's why i put such urgency on having a growth strategy and it's not that we shouldn't be paying attention to the fiscal issues. it's that we should not be solely paying attention to the fiscal issues. and that's been my concern about too much of our economic debate. >> larry summers, pleasure to have you. >> thank you. up next, what happens to the world if china slows down? i had a fascinating conversation with one of china's top economists. right back. so much... i told her it was homemade. everyone tells a little white lie now and then. but now she wants my recipe [ clears his throat ] [ softly ] she's right behind me isn't she?

[ male announcer ] progresso. you gotta taste this soup.

china's rapid rise over the last three decades is unprecedented in history. the growing demand of its 1.3 billion people has fueled growth in many parts of the world. what happens if china's economy hits a wall?

won't that stop us all in our tracks? i had a fascinating conversation recently with a top chinese economist. david li is a professor at tsinghua university. we met in davos, switzerland. if you want to understand how the chinese are thinking, listen in. thank you for joining us. >> my pleasure. >> one of the big questions the people have had in the world, not just the western world, but everywhere. is china going to have a hard landing? meaning is the economy going to have a more dramatic slow down than anyone would expect which would have ripple effects throughout the world economy? on that big issue, what do you think? >> well, to me, it's a small issue. i think it's the judgment is basically out there. that is soft landing is there. hard landing has been already avoided. i've been talking about this for the past two years, maybe two

and a half years. that is the growth rate will slow down a little bit and then pick up. >> what, why is it that the hard landing was averted? was it that the government did something extraordinary that has averted that prospect? >> well, the immediate, immediate solution was government putting a few projects, speeding up, reviving the speed of rapid rail construction and building high-tech steel plants, replacing the old ones. these are immediate. and superficial policies. i think fundamentally it's because the economy is a steel of poor economy. per capita income is still 18% of the u.s. per capita income. a long way for the chinese economy to go to catch up. so fundamentally they're still basic forces, both on the demand side, supply side so forth to push the economy to grow reasonably fast. >> people have been talking

about corruption in china because over the last few months we've heard a lot of stories, various members of standing committee and this is generally a conversation even beyond that that there is more than people think there is just gets hidden. is corruption a big problem in china? >> yes, it is a problem. it is a political problem more than an economic problem. >> why is it an economic problem? >> i often joke, this is, i warn people and this is oversimplifying fine line. i often joke that in china corruption is done. things and investments are done. where many parts of the world corruption happens without actual investments being done. which is better? of course, i'm not defending corruption. >> but pro-growth corruption. >> but this corruption whatever form it is a political problem because it is a form of distrust. it has cancerous growth. it creates political problem among the grassroots level.

but right now as we speak, there are tremendous, tremendous initiatives being implemented at the top level to try to hang up. the chinese essential government sent out a small contingent to go to hong kong to study the hong kong practice of cleaning up corruption. hong kong used to be 40, 50, 30 years ago was very corrupt. but almost overnight the system changed, cleaned up overnight and they are, they are tangible ways to do it. and ozone, let me quickly add. right now in today's china a tremendous force from the grassroots rival to push for the senior top leadership's initiative to clean up corruption. that is twitter. many, many officials got into trouble, right. today the joke is that when officials give interviews on pr

and tv don't show your watches. because people watch the tv will figure out how expensive your watch may well be beyond your official salary, and investigations will be spread out over the internet going after this official. >> what can we make of the new president and vice president of china? the two top officials and, particularly, in the realm of economic policy, because it's an unusual situation. they are both ph.d.s in economics. they looked at the danjar ping's model as, you know, as the formative years of intellectual development and understand the importance of markets because they've done economic straining, all of which would suggest that we should see the kind of reforms that people have talked about in the economic sphere. do you think we'll see reforms in the political sphere? >> very good question. let me quickly, quickly add that

i am not 100% optimistic. i do see dangers. one of them is in the political area. political reforms certainly have to be done, in my view. i strongly believe that they will be done because these people at the very top know better than, frankly speaking, you and i, that china has to implement fundamental political reform. what it is, besides the issue, but reforms have to be done. but the danger is the following. the danger is the internet people are very, i call, impatient. they want a quick change. they are also super nationalistic. so the international relations. the relations with japan and in some cases with the u.s. can complicate the domestic, political changes. so, there's a race. people say there's a race between reform and the local and the grassroot people's impatience.

>> talk for a minute about that nationalism. i know that this is not your field of specialty. but it must trouble you to see china's relations with japan, with the philippines with vietnam. all of a sudden things have gotten more sour. for 25, 27, since jao ping set china on its course, china has been very diplomatic and not aroused the suspicion and envy of its neighbors, but things seem to have changed in the last few years. >> very good observation. the world has changed a lot. one of the things is china's economic emergence. especially in the past ten years. i'm serious, also which surprised people like me. i'm serious. also, which surprised and worried our neighbors. maybe including some people in the u.s. i'm being very frank. so, i think this is the fundamental force. nobody should be blamed alone. on the chinese side, of course, we have to educate. we have to communicate with our

young kids to stay cool. don't be superemotional. external china and the rest of the world, we'll also have to face reality that a stronger and emerging china, we'll have to change. one way or the other we'll change the world other. so, there's homework to be done on both sides. >> david lee, thank you. fascinating conversation. >> my pleasure. up next, learning a lesson from canada. it's made a smart cost-saving decision and maybe we can do the same. right back. nd long hours with hr checking her heart rate, administering her medication, and just making her comfortable. one night britta told me about a tradition in denmark, "when a person dies," she said, "someone must open the window so the soul can depart." i smiled and squeezed her hand. "not tonight, britta. not tonight." [ female announcer ] to nurses everywhere, thank you, from johnson & johnson.

♪ shimmy, shimmy chocolate. ♪ shimmy, shimmy chocolate. ♪ we, we chocolate cross over. ♪ yeah, we chocolate cross over. ♪ [ male announcer ] introducing fiber one 80 calorie chocolate cereal. ♪ chocolate.

[ female announcer ] roc® retinol correxion max. the power of roc® retinol is intensified with a serum. it's proven to be 4x better at smoothing lines and deep wrinkles than professional treatments. roc® max for maximum results.

♪ pope benedict xvi announced his resignation this week and that's prompted thought about the future of the catholic church. my question from the "gps challenge" is about its present. which nation has the largest number of catholics? i'm looking for raw numbers here, not proportions. is it a, italy? b, brazil? c, mexico? or d, india? stay tuned and we'll tell you the correct answer. go to cnn.com/fareed for more of the "gps challenge" and lots of insight and analysis.